US-Russia sanctions cause Israel a loss of $680 million

Study on economic impact of US-Russia sanctions on western non-sanctioning economies reveals interconnectedness of economies.

Arutz Sheva Staff ,

Russian President Vladimir Putin and US President Donald Trump
Russian President Vladimir Putin and US President Donald Trump
REUTERS/Jorge Silva

A new study by ECEPR – the European non-partisan think-tank – revealed the extent of trade impact of sanctions imposed on Russia by the United States.

The new study, Disrupting Global Value Chains “Friendly fire” and Unintentional Consequences of the Sanctions on the Russian Federation, shows that the US and EU sanctions on Russia are causing decline in trade revenues even for non-sanctioning countries.

Concretely, the study analyzes the monthly trade with Russia of the two non-sanctioning countries Israel and Switzerland, ECEPR was able to estimate the total trade loss of these economies to be 680 million USD and 2.38 billion USD respectively.

These losses reflect exports at 74 percent for Switzerland and 75 percent for Israel, in comparison to the pre-sanction level. The average export level of the four largest sanctioning states (the US, the UK, Japan and Germany) during the same period was 70 percent of the pre-sanction base.

The report analyses monthly UN Comtrade data from early 2014 until the end of 2016. While it is widely believed that targeted sanctions limit the collateral damage on third parties, this report shows that in terms of exports, trade losses for non-sanctioning countries amount to the same levels as for sanctioning countries.

“Substantial literature exists investigating the variety of unintended consequences of sanctions for target countries. These consequences range from the disproportionate and counterproductive punishment of large civilian populations, to the intensifying of local violence, and the wholesale erosion of political rights,” says Judith Levy at the Begin-Sadat Center for Strategic Studies, Jerusalem, who took part in the study.

“This report is unique as it stakes out new territory. It highlights a little-recognized danger inherent in economic sanctions. The world is now profoundly interconnected, more so than ever before. The global value chains that link nations underpin global security.”

“It has been established that the 'friendly fire' effect of sanction policies impacts non-sanctioned goods. The question was, does it also affect Western countries not part of the sanctions? We found that the exports of these two economies fell almost as much as the four largest sanctioning economies. This supports the notion that sanctions, which in theory are targeted, in fact have wide-ranging unintentional effects,” ECEPR President Dr. Nima Sanandaji said.

“Sanctions are given more significance within the foreign policy discussion; hence we were interested in studying the actual impact. The Russian annexation of Crimea, to give one example, required a powerful response, but what is the right response – and who might be affected other than the intended target?” Dr. Sanandaji added.

According to the authors, the report demonstrates that policymakers should consider that trade fosters long-term global stability, and that the arsenal of economic sanctions will be depleted once Russia is fully alienated from the West. As the 19th-century economist Otto T. Mallery wrote: “If goods don’t cross borders, soldiers will.” Dr. Sanandaji concluded.